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Saturday, October 16, 2010

If Obama does this, we'll know he's a Republican plant
Posted by Jill | 6:14 AM
We know how Barack Obama has been doing the banks' bidding since he took office. We know about his coziness with Wall Street; a coziness that may only mirror the coziness that the Republicans have had for decades, but present nonetheless.

But if there's another bank bailout, this nation is going to be Teabagger Hell coast to coast:
But Bank of America's recent decline—down almost 10% this week—is driven by fears that the bank could be hit with huge liabilities for faulty mortgage pools. And I’m pretty sure that is not going to happen.

Why not?

Because the politicians will not let the financial stability of the largest bank in the nation be threatened by contractual rights. Not when there’s an easy fix available that won’t cost taxpayers a dime.

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act.

There’s a big difference between the financial crisis of 2008 and the new crisis. In 2008, banks were destabilized by the growing realization that they were over-exposed to the real estate market. Huge portions of their balance sheets were committed to mortgage-linked investments that were no longer generating the expected revenues or producing losses. That was a problem of economics that could only be solved by recapitalizing banks or letting some of the biggest banks in the U.S. fail.

The put-back crisis is not driven by economics. It is driven by legal rights. And there’s simply zero probability that the politicians in Washington are going to let Bank of America or Citigroup or JP Morgan Chase fail because of a legal issue.

So here’s what I expect will happen. The lame duck session of Congress will pass a bill that essentially papers over the misdeeds of the banks that originated mortgage securities. Every member of Congress and every Senator who has been voted out of office will cast a vote for the bill. And the President will sign it.

Will the public be outraged? Probably. Financial bloggers will scream from the high heavens against another bailout of the banksters. Congress may try to create some cost for banks in exchange for the forgiveness, perhaps requiring more mortgage modifications.

But the much feared put-back apocalypse will be laid to rest.

If you’re skeptical about the possibility that this will happen, you have greater faith than I do in the ability of the political system to resist doing favors for bankers.

The only question is this: What are the teabaggers actually going to do differently? And what will happen when the jobless and the foreclosed-on find themselves even WORSE off than they are now? Or won't it matter by then because the black guy will be out of the White House and the white woman they want to fuck will be in?


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Blogger casey said...
Hello Jill,

You are exhibiting 20/20 hindsight in foresight (prognostication/prediction). It seems that you have a time machine that went back to the future.